Flipkart, the country’s largest e-commerce marketplace, has received an investment of $2.5 billion from SoftBank Vision Fund, giving it the much-required arsenal to continue in pole position for the next 18-24 months, as it fends off competition from global behemoth Amazon.
This is the biggest private investment in an Indian technology company, making Vision Fund one of Flipkart’s largest shareholders.
While Flipkart did not reveal the amount invested, the fund infusion will take Flipkart’s cash reserves to more than $4 billion. This is over and above the $800 million it has as reserves.
SoftBank’s investment, a mix of primary and secondary capital from Vision Fund, is based on a post-transaction valuation of $11.6 billion when it had raised $1.4 billion during its 14th fundraising round this April. Sources said the Vision Fund’s primary investment in Flipkart is $1 billion while the remaining $1.5 billion went towards buying shares from Tiger Global Management, Flipkart’s largest shareholder.
The e-tailer is now one of India’s best-funded start-ups, having raised over $7 billion in 14 rounds of funding since its inception in 2007. Amazon has committed to invest $5 billion in the Indian market.
“This is a monumental deal for Flipkart and India...SoftBank’s proven track record of partnering with transformative technology leaders has earned it the reputation of being a visionary investor,” said Binny Bansal and Sachin Bansal, Co-Founders of Flipkart.
Masayoshi Son, Founder and Chairman & CEO of SoftBank Group Corp, who previously announced his long-term commitment to investing in India, said, “We want to support innovative companies that are clear winners in India because they are best positioned to leverage technology and help people lead better lives. As the pioneers in Indian e-commerce, Flipkart is doing that every day.”
The SoftBank Vision Fund investment comes 10 days after Flipkart’s bid to buy out Snapdeal, one of SoftBank’s portfolio companies in India, fell through.
But will it help? While this investment will help Flipkart solve cash-flow problems, introduce new product lines like groceries, bring in fresh talent and make strategic acquisitions, it is not enough to compete with Amazon, feels Sanchit Vir Gogia, Chief Analyst and CEO of Greyhound Knowledge Group. “Amazon has very strong commerce, content, cloud and advertising businesses to back it while Flipkart’s wallet business is weak, it tried and failed in the advertising business and has no play in the content or cloud business.”